![]() ![]() Most localities don’t project their costs and revenues out beyond the coming fiscal year. Of highest priority is multiyear planning. States should require stronger local fiscal management practices. If shame won’t suffice to restore solvency to cities, Governors must get involved. All they can do is raise awareness of the problem. Of course, treasurers and comptrollers have little real power. New York State comptroller Thomas DiNapoli recently established one California’s Bill Lockyear would very much like to. Events can move rapidly, leaving little time for deliberation an a priori articulation of the powers state authorities have to address distress will minimize controversy and enable the strongest response.Ī general intervention system will require an early monitoring system. Even when a small city falls into distress, it typically requires a major policy response from state government. More states should adopt general intervention laws similar to Michigan’s Public Act 436. Most interventions are executed by means of ad hoc legislation. Most states don’t have general intervention systems in place, which define, in advance, how to manage distress from its earliest warning signs all the way through to bankruptcy, if necessary. Even municipal bankruptcy requires state action–no city can declare bankruptcy without being authorized to do so by its state government. Whether state taxpayers realize it or not, they have potential exposure to local distress, through increased borrowing costs for other municipalities within the same state (“contagion”). Since cities are the legal creations of state government, states have an indisputable right to intervene, and they also have a duty to do so. States then must step in to provide expertise over fiscal and administrative functions and/or the will to make difficult choices through a control board or receiver. Cities become insolvent because of incompetence and a lack of political will. The logic begins at the extreme: insolvent cities clearly need more oversight. They have run up massive pension and retiree healthcare deficits, they are dominated by special interests, and their tax systems are outdated and shortsighted.īut if increased state oversight were an easy sell, we would see more of it. Oversight is thankless work, which is why, from New York City in the mid-1970s to Detroit at present, state governments put off intervening until the last possible moment.įinally, state governments are hardly the model of fiscal competence. That may take decades, if it happens at all. Interventions stabilize budgets they don’t turn cities around or return them to glory. ![]() State interventions provoke resentment from local officials and produce few new friends. They actively avoid aggressive oversight, which tends to be high-risk and low-reward. Too often, states are content to pass the buck to local decision-makers. But, as things stand, David Brooks and the public as a whole now seem to regard local governments as those least in need of reform.Īnother obstacle to increased oversight is that states don’t want the job. Perhaps if people voted in mayoral and school board elections as regularly as they did in presidential elections, city hall would be as unpopular as Washington. If we take voter turnout as a rough measure of familiarity with government operations, then we must surmise that American’s widespread admiration for local government is based largely on ignorance. For one thing, local government is Americans’ favorite form of government, consistently receiving higher favorability ratings than state and federal government ( way higher in the latter case). To strengthen budgets, states should exercise more fiscal oversight over local governments. Though Detroit-style insolvencies will continue to be rare, without reform, they will be more common than in the past. ![]() Spending on healthcare and pensions continues to rise faster than revenues, crowding out spending on basic services. Four years after the end of the recession, cities’ fiscal outlook remains unpromising (discussions here and here, esp.
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